Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1887-02-23
Farm Finance.

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Farm Finance.
In all, or nearly all, reports of farm
transactions relating to money, there
seem to be certain faults which spring
from g. lack of knowledge of the prin-
ciples OF finance; capital owned is
confounded with capital borrowed, in
terest with profit, and wages with
profit. These mistakes lead to confu.
sion. The greatest pains may be tax
en- to arrive at just conclusions, but if
care is not taken to give each account
it's proper position o.. value, theresult,
on paper, will often be at variance
with the reality. have seen printed
reports of farm crop accounts from
which, after the closest study, could
not arrive at conclusions. The ac-
counts were jumbled, and the results
misleading. The foundation of every
mans business is capital. The
result of the proper use of capital
is profit. The cost of the means
of arriving at this profit is wages.
If capital is borrowed, or land rented,
the cost OF the use of either is called
interest or rent. The two are exactly
similar. Interest is rent paid for the
use of money. Of the two rent is gen.
orally less than interest, because land
is safer in another PERSONS hands
than money. 1t is generally from the
improper use of interest, that confu-
SION arises in accounts. Interest
should never enter into an account at
all. 1t should be used only on the
outside, as it were, Or (more plainly
after the account is completed. We
must remember that to make an &C.
count exact, only actual value and
costs must enter into it. Interest
bears no relation whatever to the &C.
count, but only to the capital in
vested-that is, interest is neither q
part of the value nor q part of the
cost, but only q part of the profit, and
as such should be considered. What
has been said of interest will also ap-
ply to rent.
Briefly, farm bookkeeping may be
divided into two classes-business &C.
counts and crop accounts. By the
first, We ascertain the gain or loss on
our capital invested. In this will ap-
pear all real and personal accounts;
all actual business transactions, and
thus all moneys paid for rent, interest,
taxes, labor, stock, etc. Be sure never
to allow anything but actual business
transactions to enter into this &C.
count. If no land is rented, there will
be no rent account; # no money is
borrowed or lent, no interest, and so
on. Make no charge for your own la
Dor, or for any member of your family
your living, family keep and profits
are your pay. 1t is altogether unnec-
essary to keep account of hay, grain,
straw, etc., grown and fed upon the
farm. The returns for these will be
found in the increase in value of stock
and manure. (Of course all feed and
manures purchased will come into the
accounts.) Neither is it necessary to
make charges for anything grown on
the farm and used in the family, for
reasons as obvious.
Open these accounts by taking stock
OF everything you possess at a fair
market value. Add any notes or &C.
counts owing you, and cash on hand,
subtract all notes and accounts owing
by you. The result will represent
your capital. Open accounts for
grain, implements and stock, charging
only actual transactions in each;
keep separate accounts for labor, in
terest, expenses, etc. At the end of
the year, take stock again, balance
your books, and the difference be-
tween your stock at the end, and at
the beginning of the year will repre-
sent your loss Or gain. In practice it
is unnecessary to take stock of house
hold furniture, clothing, or even of
goods or produce on hand that are to
be used in the family, as these are not
q part of your business investment,
and are practically the same at any
time. All small articles about the
house used in connection with milk,
etc., must, however, be taken into &C.
count as well as everything used in
connection with the farm, such as
feed and implements.
In the crop accounts, the capital in
vested in the crop (value of land. seed
and manure), wages (cost Of working
land, putting in, taking off and mar
keting crop and taxes represent the
debit side, or actual value of invest
ment plus the cost. The credit side or
actual value of returns, is represented
bv the value of land, manure left in
land and market value of crop. The
difference between the debit and credit
represents the loss or gain. Neither
rent nor interest has anything to do
with this account. The reason for
this will be plain, if we consider why
these accounts are entered into. We
keep an account with g. crop that we
NAV ascertain whether that particu-
lar crop pays or not. The transac-
ton is exactly similar to one in trade
or manufacture. The price of the land
is represented by the cost of raw ma
terial to the manufacturer, and the
Wholesale cost of the traders goods.
The means taken to arrive at